Analysis on the development status and prospects of China's grain-oriented silicon steel

04 Mar 2024
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1. Development status of grain-oriented silicon steel
In recent years, with the advancement of production technology in my country's steel industry, more than ten companies have the production capacity of oriented silicon steel. Among them, Wuhan Iron and Steel, Baosteel, and Shougang have the full-process production capacity of high magnetic induction oriented silicon steel, and their product quality levels have improved rapidly; Private enterprises such as Guangdong Yingquan, Shandong Yiliolin, and Fujian Xinwanxin have also entered the grain-oriented silicon steel market by purchasing hot-rolled plates or even cold-rolled plates for post-process production, and many of them are preparing to further expand production capacity. Recently, several companies are launching or planning to launch grain-oriented silicon steel production projects with large designed production capacity. It can be said that the market prospect of grain-oriented silicon steel, which was once known as the "handicraft of the steel industry" as the emperor's daughter had no worries about marrying, is quite grim.
2. The plummeting price of grain-oriented silicon steel is due to the substantial increase in production capacity
Oriented silicon steel is mainly used to make transformer cores, and its terminal demand is highly dependent on power grid engineering construction; as a material with good conductivity, about 75% of copper is used to make copper wires. It can be said that the end markets of grain-oriented silicon steel and copper have a strong correlation. The supply side of copper is limited by factors such as mine resource reserves, mining capacity, and construction cycles, and the supply elasticity is small; grain-oriented silicon steel is an industrial manufactured product, and the supply elasticity is significantly higher than copper.
According to surveys, in the past ten years, the average price of grain-oriented silicon steel in the market has dropped from a high of nearly 48,000 yuan/ton to a low of 12,700 yuan/ton in 2015, a drop of 73.5%. During the plummeting process, there was almost no obvious rebound. During the same period, the price index of copper, which is an important raw material for transformers along with oriented silicon steel, fell by 54.4%, which was smaller than that of oriented silicon steel. It also rebounded sharply from 2009 to 2011. Calculations show that the price correlation coefficient between copper and oriented silicon steel is only 0.19, while the apparent consumption correlation coefficient is as high as 0.981. It can be said that the demand-side trends of grain-oriented silicon steel and copper are similar, and the huge difference in price fluctuations is mainly due to differences in the supply side, that is, the increase in production capacity of grain-oriented silicon steel is much greater than that of copper. For example, Baosteel's grain-oriented silicon steel was put into production in May 2008, and Shougang's grain-oriented silicon steel was put into production in March 2012. After they were put into production, the price of grain-oriented silicon steel showed a significant downward trend.
Therefore, the substantial increase in the production capacity of grain-oriented silicon steel is the main factor leading to the collapse of its price.
3. The domestic market demand for grain-oriented silicon steel will slow down in the long term
In the long term, the market demand for grain-oriented silicon steel is closely related to the national electricity consumption, with a correlation coefficient as high as over 0.99. The development history of Japan, the main producer of silicon steel sheets, also proves this point. Data show that during its period of high economic growth, the production of silicon steel sheets (including non-oriented) increased simultaneously with power generation; after Japan's economy entered a period of stagnation, its national power generation and silicon steel production also peaked simultaneously, as shown in Figure 5.
At present, my country's economic structure adjustment has entered a deep-water zone, and the growth rate of social electricity demand has dropped significantly. It is expected that my country's power generation will be in a low-speed growth stage for a long time in the future. It can be expected that the market demand for grain-oriented silicon steel in my country will also enter a stage of slow growth.
In 2015, my country's grain-oriented silicon steel output was 1.21 million tons, with a capacity utilization rate of 95.81%. It has a very high capacity utilization rate in the steel industry. The market supply and demand are basically balanced, and the net profit margin remains above 30%. However, it is worth noting that since 2012, the consumption of grain-oriented silicon steel has remained at about 1.2 million tons/year, and the expansion has narrowed significantly. However, as a number of new companies entering the market release their production capacity, it is expected that the production capacity of grain-oriented silicon steel will see a new round of explosive growth in the next three to five years. The downward pressure on market prices will greatly increase, and profit levels may be significantly reduced. For example, a company in Taiyuan initiated a project to build a new normalized pickling production line in 2014, with a designed capacity of 300,000 tons, including 100,000 tons of oriented silicon steel. It is expected to be completed and put into production in May 2016; a company in Chongqing is preparing to build a new normalized pickling production line with an annual output of 60,000 tons. A project of oriented silicon steel; a company in Fujian is preparing to build a project with an annual output of 80,000 tons of oriented silicon steel; a company in Hebei is conducting production trials of oriented silicon steel steelmaking and hot rolling processes.
4. The impact of State Grid Corporation’s policies on the grain-oriented silicon steel market
The market demand for grain-oriented silicon steel depends on investment in downstream industries such as power supply, power grid, metallurgy, petrochemical industry, railways, and urban construction. Among them, the focus and development strategy of the State Grid have a decisive impact on the entire grain-oriented silicon steel industry.
The State Grid Corporation of China plans to start construction of 76,000 kilometers of 110 (66) kV and above lines in 2016, with a power transformation (converter) capacity of 550 million kVA. 47,000 kilometers of lines of 110 (66) kV and above have been put into operation, with a substation (converter) capacity of 310 million kVA. The total planned investment is 439 billion yuan, an increase of 4.4% compared with the total planned investment in 2015, and a decrease of 2.9% compared with the actual total investment in 2015.
Due to the increasing downward pressure on China's economy since 2015, investment in power grid projects increased significantly in the second half of 2015. Investment in power grid projects also experienced explosive growth in the first three months of 2016, with a year-on-year increase of 40.9%. It is highly likely that the actual investment in power grid projects in 2016 will exceed the total planned investment.
On April 1, 2016, the Ministry of Commerce issued an announcement to implement a preliminary anti-dumping ruling on imported grain-oriented electrical steel originating in Japan, South Korea and the European Union: Starting from April 2, 2016, import operators must When purchasing products, corresponding deposits should be provided to Chinese Customs based on the dumping margin (14.5%-46.3%) of each company determined in the preliminary ruling.
At the same time, the technical level of major domestic manufacturers of oriented silicon steel has improved rapidly, and their products can now largely replace imported high-end oriented silicon steel sheets. It is also difficult for new manufacturers to enter the grain-oriented silicon steel market to release their production capacity in 2016.
It can be expected that the domestic market demand for grain-oriented silicon steel will remain generally strong in 2016, and prices will continue to rise.
However, it must be noted that although social electricity consumption increased significantly by 5.6% year-on-year in March 2016, China's economic structure is already in a stage of deep adjustment. Social electricity consumption no longer has the basic conditions for long-term recovery of rapid growth, and the government will not Simply to maintain GDP growth, China continues to implement ultra-large-scale economic stimulus policies. Therefore, domestic power grid project investment and market demand for oriented silicon steel do not have the foundation to maintain long-term rapid growth.
5. Substitutes for oriented silicon steel
As the country pays more and more attention to improving the efficiency of power supply and distribution systems, and distribution transformers account for a very large proportion of the entire distribution system, the requirements for their loss, noise and cost are getting higher and higher. The original S11 Type products can no longer meet the market demand and will be gradually eliminated. S13 type products and S15 type products with lower losses have gradually become the mainstream of the market, while S15 type products can currently only be produced with amorphous materials. In 2015, the State Grid stipulated that amorphous transformers should account for more than 60% of newly purchased distribution transformers during operation and inspection. In the recommended energy-saving catalog of transformer products launched by the Ministry of Industry and Information Technology, dry-type amorphous alloy core distribution transformers ranked first. . Since the grain-oriented silicon steel consumed by distribution transformers accounts for about 60% of the grain-oriented silicon steel market, this policy has had a great impact on grain-oriented silicon steel manufacturers, and the medium and low-grade grain-oriented silicon steel market has been greatly affected.
However, the impact of this impact on various grain-oriented silicon steel manufacturers is different. For manufacturers that can only produce general oriented silicon steel and low-grade high-magnetic induction oriented silicon steel, it is difficult for their products to enter the large transformer market. In the distribution transformer market, they directly face competition from amorphous materials. If they can no longer strictly control production costs, Its market competitiveness will decrease significantly. Manufacturers that can supply high-grade, high-magnetic induction oriented silicon steel in batches can take advantage of national policies to occupy the market of original medium- and low-grade oriented silicon steel manufacturers, and their product sales may be wider.
Currently, countries around the world attach great importance to the construction of solar and wind energy power generation projects, which brings new opportunities and challenges to the oriented silicon steel market. Although the installed capacity of solar and wind energy accounts for a small proportion of my country's total installed power generation capacity, its growth rate is rapid: in 2015, China's cumulative installed wind power capacity was 145.1GW, surpassing the EU; the installed capacity of solar photovoltaic power generation was 43GW. In 2016, my country will continue to target a 21% increase in solar and wind power generation to reduce greenhouse gas emissions and reduce dependence on fossil fuels (especially coal).
Solar and wind energy power generation requires the use of photovoltaic inverters and wind energy inverters, and their voltage conversion modules are high-frequency transformers. Under high-frequency conditions, the loss of conventional oriented silicon steel is significantly greater than that of amorphous materials and magnetic powder core materials. Therefore, grain-oriented silicon steel manufacturers urgently need to develop thin-gauge grain-oriented silicon steel suitable for working at medium and high frequencies in order to occupy a place in the solar and wind energy power generation markets. Otherwise, they may face the dilemma of losing market share in the near future.
6. Export market
Since 2014, the export volume of oriented silicon steel has doubled for two consecutive years, showing explosive growth; in 2015, China's oriented silicon steel exports were 135,800 tons, exceeding 100,000 tons for the first time, accounting for 11% of the national output. In recent years, Chinese oriented silicon steel manufacturers have made significant technological progress and product quality has been continuously improved. They have cost advantages over foreign oriented silicon steel manufacturers and have strong export competitiveness.
Due to the growth in power demand in emerging markets such as India and the Middle East, they have become an important export market for China's grain-oriented silicon steel. In addition, the demand for replacing and upgrading old transformers in North America and Europe has also become the main driving force of the market. If Chinese oriented silicon steel manufacturers can further improve product quality and strictly control costs, the oriented silicon steel export market is expected to continue to grow rapidly in the next few years and become a breakthrough in digesting China's oriented silicon steel production capacity.
7. Judgment of the long-term development trend of grain-oriented silicon steel
In summary, we believe that the overall supply and demand of the oriented silicon steel market in 2016 will be basically balanced, and product prices will have some room to rise; however, in the next three to five years, the domestic oriented silicon steel market will face the dilemma of slowing demand growth and a substantial increase in market supply, and the long-term price decline is A high probability event; in the longer term, grain-oriented silicon steel will face competition from amorphous materials and magnetic powder core materials, and the market capacity may even shrink. Therefore, it is recommended that manufacturers of oriented silicon steel pay more attention to improving product quality and the proportion of high-end grade products, and actively develop strategic products such as thin and ultra-thin oriented silicon steel, rather than blindly pursuing the expansion of production; at the same time, they should pay more attention to the overseas market of oriented silicon steel. Expansion, the export market may become a breakthrough in digesting domestic oriented silicon steel production capacity.
Grain oriented silicon steel
Grain oriented electrical steel
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